# \[RFC\] Incentives Detox Proposal

**URL:** <https://forum.arbitrum.foundation/t/rfc-incentives-detox-proposal/25849>\
**Category:** Finalized AIPs\
**Tags:** proposal\
**Created:** [July 22, 2024, 2:57pm UTC](https://forum.arbitrum.foundation/t/rfc-incentives-detox-proposal/25849 "2024-07-22T14:57:49Z")\
**Posts on this page:** 1\
**Showing post:** 65

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**Author:** ![Sinkas](https://yyz1.discourse-cdn.com/flex029/user_avatar/forum.arbitrum.foundation/sinkas/32/2958_2.png) [@Sinkas](https://forum.arbitrum.foundation/u/Sinkas)\
**Post date:** [September 2, 2024, 11:45pm UTC](https://forum.arbitrum.foundation/t/rfc-incentives-detox-proposal/25849/65 "2024-09-02T23:45:38Z")

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Below is the recording of the second call, the call’s transcript, and the chat log. You will also find notes on the topics/questions we discussed and a summary of the views expressed. During the call, we did a quick review of what was discussed in the first call, and then Hayden from Blockworks Research presented BWR findings on the STIP program from the research they did as a member of the ARDC. You can find a summary of all their research and findings in the comments above.

### Links

[Recording - Liquidity Incentives Call #2 (28.8.2024)](https://drive.google.com/file/d/1XIi-xE5b9vIG-1mQZAEVgKzbu7puImvF/view?usp=sharing)  
[Transcript - Liquidity Incentives Call #2 (28.8.2024)](https://docs.google.com/document/d/1-WJad-xc8I-l2Cxk9Oo_mTEkmS_OSwEmCNd8MbmRPhg/edit?usp=sharing)  
[Chat Log - Liquidity Incentives Call #2 (28.8.2024)](https://drive.google.com/file/d/1CwnxvAW73WLxu1tP5V8IKSISH05dXUBI/view?usp=sharing)

### **Summary**

The things that were discussed were:

- The importance of determining the goal of an incentive program and  
agreeing on necessary metrics to monitor its success.
- Long-term and short-term successes may conflict, and the program should be monitored  
continuously to make ongoing adjustments.
- The target users should be outside of Arbitrum, preferably from other chains like Tron or  
Binance Smart Chain.
- The success of each protocol distribution should be monitored and measured live for  
timely adjustments
- The need for tangible, organized versions of ideas to facilitate structured  
discussions.
- The need to define strategic objectives and align incentive programs with  
these objectives.
- The need for a clear vision and alignment on strategic objectives before  
designing incentive programs.
- The need for a smaller budget with very specific goals to support protocols

From the presentation of Hayden from Blockworks research, we discussed:

- The initial growth of protocols during STIP was driven by liquidity incentives and fee rebates, but usage declined post-incentives.
- STIP boosted Arbitrum’s market share in major DeFi metrics, but gains largely reverted  
to baseline costs of capital.
- The cost of capital within Arbitrum increased during STIP due to boosted yields and  
lower fees, leading to user and capital migration.
- Protocols with unique mechanisms or new products outperformed others, amplified by  
incentives.
- The cost of capital for verticals converged as users found the correct yield across the  
vertical.
- The cadence of incentive distribution allowed sophisticated users to jump from protocol  
to protocol

In terms of ideas for future programs:

- Suggestions include having a unified incentive framework with application-specific  
criteria
- Emphasis on normalizing incentives per protocol based on metrics like TVL, volume, and  
sequence of revenue.
- The importance of continuous monitoring and immediate feedback to avoid misuse of  
funds.
- A unified incentive program where protocols sign up for specific incentive programs.
- Protocols should invest their own money in incentive programs, while the DAO pays for  
users who stay active. The goal is to ensure protocols use incentives to build value over time, not just to extract incentives.

### For next call:

We encourage participants to prepare for the next call and share their visions and lessons earned with the rest of the working group. If you have an analysis, a report, or other findings to present during one of the upcoming calls, please reach out to [Sinkas on Telegram](https://t.me/sinkas5).

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